British Steel scandal should bring about true change

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British Steel scandal should bring about true change

While the legal teams supporting the former BSPS members are pushing for fair redress - a fight that has gone on far too long for far too many clients, the whole environment around safeguarding scheme members and protecting their pensions needs to change. 

Indeed, the lifestyles and livelihoods of many former BSPS members have changed significantly as a result of taking advice to transfer out of the defined benefit pension scheme - and the change, as outlined in many FTAdviser reports - has not usually been for the better.

Henry Tapper, chief executive and founder of AgeWage, and founder of Pension PlayPen, talks to FTAdviser In Focus about what is now needed and what sort of lasting, positive changes should be put in place to make sure such a scandal never hits the UK again.

FTAdviser: Will every client who was wrongly advised to transfer out ever get the proper amount of redress?

Henry Tapper: Proper redress would be reinstatement into BSPS, which is now free of the PPF.  It has also been mooted that a superfund could offer pensions to members on commercial terms but there is no sign of the FCA promoting any form of reinstatement.

We do not need more legislation; we do need better regulation.

The current hope for steelworkers is the FCA’s consultation on a BSPS specific redress scheme. But this scheme appears to be focussing on further redress from IFAs. How much more blood can be wrung out of that stone?

It’s important to point out that many steelworkers were fully aware of the risks they were taking and were well advised.

FTA: Have we learned the lessons taught to the industry by BSPS? 

HT: We’ve learned some lessons, but I’m uncomfortable that government is planting the blame for the fiasco of the BSPS Time to Choose purely on rogue advisers. This ignores the serious failures of other parties – including the Trustees, to properly protect members. 

In retrospect, the Regulatory Apportionment Agreement that required the BSPS to make choices was unnecessary. BSPS should have entered the PPF assessment in early 2017 which would have prevented the right to transfer. 

Entering PPF assessment does not mean members get PPF benefits. Well managed schemes like BSPS can re-emerge from assessment and provide PPF+ benefits. This is in fact what has happened. BSPS entering PPF assessment should not have been presented as disastrous to member interests.

For rank-and-file members, the PPF did not represent a major cut in benefits. The worst cuts were for senior management. I have concern that it was those who had most to lose from the PPF, who set up the RAA.

TPR has a duty to protect the PFF from risky schemes and it required the trustees to de-risk in early 2017. The result of this was a change to discount rates which doubled transfer values. This created a double-whammy of irresistible CETVs available on a time-limited basis.

In short, the RAA with its 'Time to Choose' [document] was an accident waiting to happen.

There are clearly lessons to be learned for the Pensions Regulator. I hope the NAO review of the FCA’s handling of BSPS , will look at the potential for conflicts in the setting up of the RAA which extend to scheme and corporate advisers.

With regards to IFAs, lessons are being learned the hard way.

FTA: What sort of warning signs were there that should have been paid attention to in 2017? Are we going to be able to recognise these now?

HT: The steelworkers looked for help and invited a number of “experts”, including myself, John Ralfe and Al Rush into their online discussion groups. Between April and October 2017.

We saw how confidence in the sponsor of BSPS fell away and how many steelworkers were actively looking for a way out of BSPS. 

I made representations to the Trustees about the likely deluge of transfer requests, but we were told that there was no history of transfers from the scheme. Relying on historic confidence of members at a time of unprecedented stress on their livelihoods was not a good idea. 

The lesson to learn is for trustees to listen to what members are saying.

FTA: How can advisers spot red flags or potential problems with old portfolios when taking on new clients? 

HT: I would encourage due diligence to focus on the quality of the documentation of advice given, the integration of advice and wealth management and the quality of the wealth management solutions on offer.

When people are facing huge financial changes - such as potential redundancy or changes to their pension scheme - what should the trustees, unions, employers, scheme managers and others be doing to ensure members get proper access to the best advice?

It is hard to quantify the disruption and worry to steelworkers having to choose between a pension presented as being paid from the PPF and one paid from a new scheme. 

But it is easy to see the consequences. Management should not have burdened members with difficult financial choices at such an emotive time.

The real failure from government was to allow the RAA to go ahead in the first place.

To date the blame has been placed on rogue IFAs who have not had the means to provide redress for woeful advice (both to transfer and on subsequent investments). Many of these advisers have folded and their PI policies have lapsed.

So the onus of redress falls on the Financial Ombudsman Service and the Financial Services Compensation Scheme.

As regards access to best advice, most of the rogue advisers appeared on the directories to which the trustees referred members. For example, Active Wealth Management, was the leading IFA on MaPS’ directory. 

One steelworker who used AWM said at a 2018 Government hearing that “he thought this was what I was supposed to do”.

One national firm active in Scunthorpe, operated out of a union office.  

[The cross-advisory group of volunteer advisers] Chive, organised by financial adviser Al Rush, restored some order in early 2018 but this was independent of the trustees.

Though LEBC was employed to give guidance on the choice between the PPF and BSPS2, my request for a transfer advice helpline manned by authorised people, was turned down by the trustees on the advice of their consultants.

FTA: What is the government's role to play in preventing future BSPS-type scandals? Is this purely a matter for private companies or do we need better legislation?

HT: We do not need more legislation; we do need better regulation. TPR and FCA failed – as did MaPS. The Government tried to put a stopper on the damage with Caroline Rookes’ report, but the genie was out the bottle. 

The banning of contingent charging for almost all transfer inquiries was a necessary intervention which came too late, but the real failure from government was to allow the RAA to go ahead in the first place, putting so much hard-earned pension at risk.

You can catch Henry Tapper tweeting at @henryhtapper